Drug import probe opened in April 2025 led to 100% tariffs and a Lilly pricing deal

The Commerce Department opened a Section 232 national security investigation into imports of pharmaceuticals and pharmaceutical ingredients on April 1, 2025 ^[1]. The probe concluded that the United States relies too heavily on foreign production of patented medicines, and on April 2, 2026 it produced a presidential proclamation imposing a default 100% tariff on those imports, with lower rates for companies that build domestic capacity or negotiate pricing deals with the administration ^[1][2].

What the investigation found

The Secretary of Commerce found that roughly 53% of patented pharmaceutical products distributed in the United States are produced outside the country, and that only about 15% of patented active pharmaceutical ingredients (APIs) by volume are produced domestically for the U.S. market ^[2]. The proclamation states that this reliance threatens access to life-saving medications during a supply chain disruption and that a self-sufficient domestic manufacturing base is vital for military and civilian health security ^[2].

The proclamation sets a 100% ad valorem duty on patented pharmaceuticals and associated ingredients, then carves out lower rates ^[2]. Companies with onshoring plans approved by Commerce pay 20%, a rate that rises to 100% on April 2, 2030 ^[2]. Companies that have both an approved onshoring plan and a most-favored-nation (MFN) pricing agreement with Health and Human Services pay zero until January 20, 2029 ^[2].

Products of the European Union, Japan, South Korea, and Switzerland and Liechtenstein jointly face 15%. The United Kingdom gets 10%, which the proclamation says will fall to zero to the extent a future U.S.-U.K. pricing agreement requires ^[2]. Generic drugs and biosimilars are not being adjusted at this time, nor are orphan drugs, nuclear medicines, plasma-derived therapies, fertility treatments, cell and gene therapies, antibody drug conjugates and certain medical countermeasures ^[2].

How companies responded

Pressure came before the tariffs. A May 12, 2025 executive order directed Health and Human Services to pursue MFN pricing and told Commerce and the U.S. Trade Representative to counter what it called foreign freeloading on American-financed innovation ^[1]. On July 31, 2025, the White House sent individually addressed letters to 17 manufacturers, including Eli Lilly and Novo Nordisk, demanding MFN pricing in Medicaid, MFN prices on all new drugs, repatriation of increased foreign revenue and participation in direct-purchasing programs at MFN rates. The letters set a 60-day compliance window ^[1].

On November 6, 2025, the administration announced an agreement with Eli Lilly giving the company three years of relief from the coming tariffs in exchange for MFN pricing on key drugs and investment in U.S. manufacturing. Under the deal, state Medicaid programs get MFN prices on Lilly products, Medicare will cover key obesity drugs for the first time at a lower cost, and Lilly committed to discounts for American patients, according to the announcement ^[1]. Lilly has said it is "investing more than $50 billion in U.S. manufacturing to boost domestic production in key therapeutic areas" ^[1].

Lilly has also announced plans to spend an additional $4.5 billion at two sites in Lebanon, Indiana, part of a campus that makes ingredients and drug substances for its diabetes and obesity franchise, including tirzepatide, the molecule in Mounjaro and Zepbound ^[1]. Wisconsin approved up to $100 million in tax credits for a roughly $4 billion injectable-products expansion in Bristol, and Pennsylvania assembled a $100 million package for a $3.5 billion Lilly site in Fogelsville projected to create 850 jobs ^[1].

Why it matters for patients

The tiered rates decide whether a given brand-name medicine crosses the border duty-free, at 15%, or at 100%, depending on the manufacturer's agreements with Washington and where the product is made ^[2]. The Lilly agreement includes Medicare coverage of key obesity drugs for the first time at a lower cost, but the announcement does not name which drugs fall under that commitment beyond "key obesity drugs," and it has not been disclosed how the discounts are calculated ^[1].

Generic drugs and biosimilars are excluded from the tariffs, so the structure does not directly raise duties on those products ^[2]. It has not been reported how much of any tariff cost would reach patients if a manufacturer pays the duty instead of moving production, or whether companies will absorb the cost, pass it on, or avoid it by onshoring.

What happens next

• Companies with approved onshoring plans plus MFN pricing agreements hold a zero tariff rate until January 20, 2029 ^[2].
• The 20% rate for companies with approved onshoring plans rises to 100% on April 2, 2030 ^[2].
• The proclamation directs Commerce and Health and Human Services to report on negotiations within 90 days, and says the president may take other action if an agreement is not entered into within 180 days, is not carried out, or is ineffective ^[2].